Five-step investment roadmap for early-stage partnerships in pharma

29 May 2017 6 min. read

Partnerships can drive more early-stage assets into clinical trials, writes Ben van der Schaaf, a principal with Arthur D Little.

Investors who see early-stage compounds and indications as valuable assets can provide the capital for, and share the risk involved in, getting a promising new therapy through development and on to market launch.

Funding a clinical trial today can cost pharma companies upwards of $100 million, and that does not even take into account the costs of marketing and distribution necessary for a new life-enhancing therapy to reach patients. Global pharma businesses that spent the last decade building a robust pipeline of early-stage compounds and indications are now faced with a wide portfolio of potential assets without the resources to fund their development. The result? Drug makers that have invested to ensure strong R&D pipelines are now losing billions each year in potential revenue as promising new therapies sit dormant, waiting for their patents to expire. 

Innovative strategists in big pharma are exploring a new way to claw back some of these costs, and expand the number of new therapies that go through to the development and clinical trial stage. In a word: partnerships. Working with CROs, universities, and patient advocacy organisations, drug makers can find investors who see their compounds and indications as valuable assets, and are willing to provide the capital and share the risk involved in getting a promising new therapy through the development stage, regulatory approvals, and launched to market.

Companies interested in partnering to fund lower-priority drug trials should consider this five-step investment road-map to help them explore the possibilities: 

A 5-step investment roadmap for early-stage partnerships in pharma

Identify clinical trials

When reviewing their portfolio of de-prioritised new therapies, drug makers must make tough choices about which clinical trials will attract external investors and be profitable once in market. Trials need to be relevant and complementary. The relevance of a trial is based on its potential market demand, and will predict the value of the development asset if trials are successful and it is approved by regulators.

Packaging a number of trials for new drugs in the same therapy area is an attractive offer for investors, and will reduce upfront costs. Even trials in the same therapy area must be complementary, in the form of geography, indication, trial duration, patients, and so on, to realise these operational advantages and identify the right CRO to execute them.

Remember, a real transfer of risk from the biopharma company to other parties is required for the partnership to help the drug maker develop its assets without adding development costs to its bottom line. A clinical trial with a 95% probability of success would not satisfy this requirement, as it would just be a financing arrangement camouflaged as an investment.

Find partners for funding and execution

A successful partnership will bring together the biopharma’s science and data, the CRO’s trial operation capability and capacity, as well as the investors’ funds and knowledge of structuring and exiting such transactions. Finding the right CRO should be based on its location, track record, and expertise in the relevant therapy area. 

Finding the right investors takes careful targeting and multiple approaches. These could be venture capitalists specialising in biopharma, non-profit organisations and patient groups with a focus on a specific therapy area, and other types of investors with interest in the specific disease area or public health issue.

Plan for partnerships in pharma

Develop an operating model and structure

Once partners are committed to the project, the next step is to develop a legal structure and financing arrangement. The new entity could be a joint venture or special-purpose entity, established solely to activate and manage the execution of the included trials, with governance by representatives from all partners. Setting clear goals for each partner and carrying out a full risk assessment are critical to setting the new organisation on a solid foundation. The risk assessment must include thorough due diligence and a clear exit strategy that ensures all partners are clear of the outcomes and their role in delivering the final goals.

Activate and execute

Over the next two-to-four years the new organisation will work to complete development of the selected potential therapies. This will mean establishing processes and roles upfront to ensure efficient and effective operations. Consider the following four areas before operations begin:

  • Technical: have you established a protocol that can deliver the clinical data required to support an increase in product value?
  • The commercial value of the trial: is the market assessment valid, and is there real revenue potential for the drug(s) coming out of it?
  • Operational: are the trials in question designed in such a way that they can be executed efficiently and on time, to deliver the necessary cost savings? Are the proposed trials operationally complementary?
  • Cultural: have all partners come together to develop shared norms and agreed ways of working that will ensure successful progress and a clear exit once the investment value has been realised?


The partnership must have a clear, pre-agreed process for closing out of the relevant trials, realising value for each partner in line with the contract, and effectively dispersing, or disposing of, accrued assets. 

The pharma industry is already well versed in working in partnership at both the drug discovery and marketing and distribution stages. Building these new partnerships to fund clinical trials and get new life-saving therapies to market is a natural next step for those with robust R&D pipelines, and will result in improved value creation for companies, and improved quality of life for patients.